In The Big Chair - Estuardo Ortiz of JetSmart

Estuardo Ortiz, founder and CEO

JetSmart is an ultra low-cost carrier (ULCC) based in Santiago, Chile, and owned by the American investment fund Indigo Partners, which also has controlling interest in Frontier Airlines and stakes in Mexican budget airline Volaris and European carrier Wizz Air.

JetSmart operates 28 domestic routes in Chile and has transported three million passengers since its launch in 2017. The company says its presence in the market has contributed to a 35% reduction in air fares. In 2018 the carrier commenced operations in Peru and Argentina.

Why was Chile the right place to launch JetSmart airlines in 2017?

We chose Chile because it offers history of economic growth, openness for foreign investment, political stability and strong institutions. The air travel industry had shown healthy growth and offers high potential for stimulation to generate new passengers, particularly from the middle class.

I read that your business model is based on obtaining traffic not from other airlines but from people who had been traveling by bus or car. Has that been effective?

Our goal is not to take market share away from existing carriers but rather to stimulate growth and create new markets. Our ultra low‐cost carrier (ULCC) model allows us to offer ultra‐low fares and makes air travel affordable to people who would not otherwise consider it.

The ULCC model at JetSmart means lower airfares for all Chileans, which encourage non‐fliers to fly but also regular fliers to fly more. It also relies on a simple and transparent process to purchase a ticket, where you can select only the services that you would like during the flight and only pay for those.

What are the airline’s primary distribution channels?

Our primary distribution channel is JetSmart.com. That makes things easier to the customer and contributes to a more efficient model. We also have a programs for companies, also online, which makes the process easier for companies and has delivered 15% to 20% savings in air travel expense.

We also offer a "discount club" where members receive a very convenient discount every time they fly with us, not only in their tickets but also in their luggage.

Tell us about JetSmart’s pricing strategy and how it incorporates ancillary services.

JetSmart has a simple fare structure: just one fare. It is the SMART Fare which only includes transportation from point A to point B and a small bag (backpack or briefcase).

Then, the customer has the right to choose. We make it simple and transparent for our customers to select ancillary services of their choice through the booking flow, including baggage, seating, priority boarding or rent‐a‐cars among others. We have seen great acceptance from our customers in Chile, Peru and Argentina on the ULCC model.

What have been the biggest challenges to building a new airline business from scratch?

It is a chance in a lifetime. The most important thing you need to focus on and do extraordinarily well is to select, build and motivate an extraordinary team - people.

A ULCC is a different type of aviation and you need the right DNA, mindset and technical skills in your team. It is a major undertaking to define and implement all of the elements of an airline, from fleet selection, systems, regulatory approvals and operational readiness, but it is also the best part of the journey.

Many people said to me that there was no case for an ULCC in Chile and South America, and three million passengers later, they were wrong.

How are you using technology to improve the customer’s experience when booking and traveling?

We do everything online, so it’s easier for customers to choose every single thing they would like on their trip. We have recently won a recognition in the e‐commerce Awards in Chile, in the travel and tourism category.

We continuously track and improve the user experience on our online interface, so customers can buy a ticket with less clicks. Our check‐in is online in close to 97% of our customers. We continue to innovate to improve into a more friendly, transparent and convenient online platform to our customers.

In addition to domestic routes in Chile, you offer service to and from Peru, and in February of this year you added several domestic routes in Argentina. Why those markets, and what are your next priorities for expansion?

Peru and Argentina are both natural markets for us. Chileans are flying even more to Lima and Buenos Aires. Argentina has the lowest trip‐per‐capita ratio in the region, so we see large untapped potential for growth. For now, we are focused on consolidating our rapid growth, more than 100% this first quarter, in Chile and Argentina.

What is the long‐term vision of the airline?

We view JetSmart to become the leading ultra low‐cost leading company in South America, with a vision to have transported 100 million passengers by 2026, allowing affordable travel across the region.

Prior to founding JetSmart, you worked for more than a decade in the airline industry, first for TACA Airlines in El Salvador and then for Avianca Holdings when the two merged. What are some of the main things you learned from those experiences that have been useful as you are building JetSmart?

So many lessons. Airlines are a very peculiar business, and you need to have respect for this industry. It is a business where you can easily get lost in so many complexities and factors.

Our goal is not to take market share away from existing carriers but rather to stimulate growth and create new markets.

Estuardo Ortiz - JetSmart

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I strongly believe you need to know who you are and what is your proposition in the marketplace, and then be consistent to it.

In a ULCC I keep it simple. It’s all about cost, and that allows us to offer the customer what they want the most: low prices. Then you focus on running a safe, reliable and on‐time airline, which reaches high efficiency and predictable customer experience.

So far, we are the most punctual airline in Chile and top five in the world with an impeccable record of safety, and more than three million passengers have trusted in JetSmart in less than two years. ULCC just works.

What are some of the unique characteristics or challenges in the airline industry in Latin America?

South America is a huge continent, and it has a strong connectivity need. There is still a large market that has not traveled, more than 160 million in the middle class, who will travel if there is a quality, safe and affordable airline to fly to attractive destinations.

To make this a reality, the region needs to change. First, we need free access to markets through an open skies policy to allow airlines to fly to, from and within countries regardless of the country base of the operator (like Europe). We need to allow airlines, as any other business, to hire foreign pilots. And we need to foster competition in airports and vendors. All of these will bring more competition, cost and therefore better routes and lower prices to consumers.

Lower airport fees for international travel are a must. They were set years ago for premium passengers; you cannot expect the middle class to travel in the region if you pay $100 just in airport fees for a round trip.

Airport infrastructure needs to improve rapidly. The industry and airlines move much quicker than the investment needed to allow that growth, and we see congested high‐cost airports across the region.

Chile and some other countries in Latin America have an active travel startup ecosystem. What advice do you have for entrepreneurs trying to enter this industry?

There are enormous opportunities in Latin America, so I’d say take the risk and go for it. Get ready because it is a lot of fun, a lot of work and even more satisfactions.

We have a lot of space to fill with great ideas, flexible companies and people with the right energy to become part of the travel industry to make it easier and better for everyone who wants to travel.